Corporation tax/directors loan

[HopeIT]

Hi I am looking for some advice on how to progress outstanding corporation tax (approx. 20k) due to the HMRC. I have been running a limited company since 2011 but stopped trading early 2013. Unfortunately I have a directors loan which equates to 17k which is technically owed back to the company and hence will contribute to the majority of the corporation tax due.

The problem is that I don't have 17k to put back into company. Additionally the companies house is chasing me for a £750 late filing fee and passing onto a debt collection agency. They have indicated they can waive this penalty if I submit a DS01 form, but I have avoided doing this as I know HMRC will challenge the strike off due to the outstanding liability. The only asset I have is the positive equity tied up in a house which I own with my ex wife which I am trying to extract funds from as part of the financial negotiations surrounding the divorce, but this is not something I will be able to bottom out quickly.

If I was to send the DS01 form knowing that I have an outstanding debt with HMRC what are the consequences? Or should I notify the HMRC that I am submitting a DS01 for the purposes of penalties with the companies house, but still intend to pay the corporation tax once I have extracted the equity?

Any guidance would be appreciated.

 

[Spongebob]

Submit the DS01 and send a copy to HMRC. If you send anything else to HMRC it should be the Spongebob letter detailed in the sticky thread at the top of this forum. Do not intimate to them that you intend to pay the CT out of personal funds.

They will object to the strike-off but their only real recourse is to wind the company up. They may or may not do this. If they have not initiated winding up proceedings within 3 months submit another DS01. And repeat.

Eventually either HMRC will wind the company up or Companies House will tire of their objections and strike it off. If the former you will have to deal with the Official Receiver regarding your overdrawn DLA. If the latter it will simply vanish.

You have no personal liability to pay the tax owed by the company. You do though have a liability to repay the DLA - but only if the OR demands that you do. Even then you will be able to negotiate favourable terms.

 

[HopeIT]

Thank you for the advice spongebob, its much appreciated.

To clarify if the OR gets involved will that take me down the bankruptcy route? Or is he brought in to simply assess my position and see what I can afford to pay?

Thanks

 

[HopeIT]

Thank you for the advice spongebob, its much appreciated.

To clarify if the OR gets involved will that take me down the bankruptcy route? Or is he brought in to simply assess my position and see what I can afford to pay?

Thanks

 

[UK Contractor Accountant]

THe OR will be interested in whether you have any personal assets he can go after- share of equity in property is the common one to go after.

 

[Alan R Price]

HopeIT

If the company goes into liquidation, the liquidator (this may be the OR) will require you to repay what you owe the company. The £17k is not "technically owed back to the company", it is a real debt, that you are liable to repay. If you go down the voluntary striking-off route, you may get away with not having to repay the debt. It is not for me to comment on the moral rights or wrongs of this.

If the company goes into liquidation and the liquidator comes after you for the money, as Spongebob says, you will probably have to negotiate payment terms. While the OR is unlikely to use public money to sue you for the benefit of creditors, HMRC may put up the money to fund a liquidator if they perceive you have the resources to pay the debt. For example, if you own, or have a share in a property that has equity, or have a substantial regular income, you will be a better "target" than somebody who is unemployed and lives in a council flat. The liquidator could pursue you into bankruptcy, or sue you and go after your house via a charging order.